The rupee completed its best week since 2009, gaining 2.6 per cent against the dollar in the wake of the debt deal agreement reached between euro zone leaders. The Indian currency posted intraday gains of 1.5 per cent on Friday, as domestic markets cheered the package. It closed at 48.77 against the dollar, higher by 74p as compared to the previous close of 49.50 on Tuesday.
The Bombay Stock Exchange (BSE) Sensex rose 516 points or almost three per cent on Friday. The BSE said there were net fund inflows of Rs 2,166 crore on Friday. Dollar sales by exporters and foreign banks in expectation that it would weaken globally also helped the rupee. Lower volumes in the holiday-shortened week also kept a check on dollar demand on Friday.
Late Wednesday, euro zone leaders reached an agreement to expand the European Financial Stability Fund to euro1.4 trillion and to recapitalise the region’s banks. Private lenders also accepted a 50 per cent writeoff on Greek bonds. Following the announcement, the rupee opened 60p higher at 48.91 and touched a high of 48.74 against the dollar on Friday.
The euro was at $1.4148 at the end of local trade on Friday after touching a high of $1.4200, while the index of the dollar against six major currencies was at 75.079 points, from 74.879 points previously.
Earlier this month, the rupee had crossed the 50-mark against the dollar, as investors rushed to take shelter in the safe-haven currency. Also, month-end dollar demand from oil importers had weighed on the Indian currency.
“Exporters were not selling dollars in hopes of a better rate. This had tightened dollar liquidity in the domestic market,” said a treasury official of a public sector bank. Also, arbitrage opportunities in the dollar forwards’ segment increased demand for it. He said consistent dollar demand from oil importers would continue to cap rupee gains.
The one-month onshore forward premium on the rupee was at 24.75 points from 25 on Tuesday, the three-month premium was at 65.50 points from 63.50 and the one-year premium was at 159.75 points, from 148. One-month offshore non-deliverable forward contracts were quoted at 49.04, weaker versus the spot rupee rate.